Self-Tying Shoe Reveal Sparks Bullish Betting on Nike Inc (NKE) Ahead of Earnings

Nike Inc (NKE) option traders are using calls and puts to bet bullishly

Alex Eppstein
Mar 17, 2016 at 12:33 PM
facebook twitter linkedin


Nike Inc (NYSE:NKE) options are trading at an accelerated rate this afternoon, as the sports apparel giant prepares to report earnings next Tuesday. What's more, NKE yesterday revealed a new self-tying shoe that will go on sale this year. Earlier, in fact, CEO Mark Parker appeared on CNBC to discuss adaptive performance technology, and at last check, the stock is 1.6% higher at $62.83.

As alluded to, NKE options are very popular today, crossing the tape at twice the usual intraday rate -- with calls and puts being exchanged at a nearly identical pace. Diving deeper, it looks like traders are buying to open the at the-money March 62.50 call, expecting the stock to advance further by tomorrow night's close, when the front-month options expire.

Option traders are showing confidence in other ways, too. The biggest single NKE trade focused on a block of 4,517 weekly 4/22 58-strike puts. It appears these contracts were sold to open, suggesting the option writer believes the shares will maintain their foothold above the $58 level over the next month. By selling the puts for $0.80 each, the trader collected an initial premium of over $360,000 (premium received * number of contracts * 100 shares per contract), which represents his maximum reward, assuming NKE stays above $58 through expiration. However, the seller has also exposed himself to significant downside risk, in the event the strike is breached.

Optimism hasn't been hard to find on Wall Street, both in and out of NKE's options pits. During the last two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 2.49 calls for every put -- a ratio that sits just 4 percentage points from an annual peak. Likewise, 80% of covering analysts have designated NKE a "buy" or better.

This glass-half-full approach is understandable, given Nike Inc's (NYSE:NKE) impressive technical run. Since hitting a near-term low of $53.64 in early February, the stock has surged 17.3%. Currently, the shares are attempting to take back their 120-day moving average for the first time in roughly two weeks. 

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.


A Schaeffer's exclusive!

The Expert's Guide

Access your FREE trading earnings guide for Q3 before it's too late!


  
 

Partnercenter